Fannie Mae and Freddie Mac both require that participants in their standard, fixed-rate, To Be Announced (TBA) eligible single-family, mortgage-backed securities (MBS) programs retain a minimum of 25 basis points of interest on mortgages in MBS pools to cover the servicing of the mortgages in the pools. The 25 basis point minimum has been in place for both GSEs since the mid-1980's, when the minimum servicing fee level was reduced from 37.5 basis points to the current level.
The GSEs consider on a regular basis requests from members of the lender community for a reduction of the current standard minimum servicing fee level. Some lenders have suggested that the GSEs reduce their standard minimum to 12.5 basis points or below. On a negotiated basis, certain non-TBA pools, designated by non-standard prefixes, already carry servicing fees below 25 basis points and even down to a zero fee strip level (in the case of a zero strip, the servicer retains income attributable to sources other than the interest rate strip from the mortgages in the MBS pool).
The GSE servicing fee level and whether it should be reduced is a substantial issue for the industry. MBA has had a central role in working with the GSEs and with MBA members to identify and develop the issues relevant to the subject. Due to the division of opinion on this issue among MBA members, the Association has no position on the advisability of reducing the minimum servicing fee. MBA's objective is to assure that all parties that are part of the debate are in possession of the facts and considerations necessary to solid decision making. Ultimately, the GSEs each will make the decision, but they have both indicated a strong interest in MBA involvement.
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